These local governments decide it makes sense to play ball with Airbnb

City Attorney Dennis Herrera, left, smiles while walking with San Francisco Supervisor Aaron Peskin, right, after announcing a settlement agreement on short-term rentals during a news conference Monday at City Hall in San Francisco. San Francisco and Airbnb have reached a deal to end a lawsuit over a law that fines the company for booking rentals not registered with the city.
Eric Risberg
The Associated Press

Nevada County this week became the latest municipality – and the first in the Sacramento region – to reach an agreement allowing the fast-growing vacation housing website Airbnb to collect and pay transient occupancy taxes on behalf of its hosts.

Airbnb officials also said Monday the company had reached a similar agreement with the city of San Francisco, which would settle a city lawsuit against the company. If approved by the San Francisco supervisors, the agreement clears the way for the service to begin collecting and remitting taxes on behalf of San Francisco property owners as well.

The San Francisco company says it has worked out deals with 275 jurisdictions across the world to collect local taxes. Sacramento is not among those with agreements, though a city official said it is close to reaching one.

The core conflict between local governments and Airbnb is over whether its hosts should be subject to the same rules that govern other lodging providers. Municipalities generally agree that Airbnb hosts should pay the same transient occupancy tax as a bed and breakfast, but they find collecting that revenue a challenge. Airbnb has generally sought to shield its hosts from taxes, and won’t even reveal their locations to local governments. With attempts at a statewide solution at a stalemate, a patchwork of agreements are emerging as cities and counties negotiate with the rapidly growing platform.

Explore where you live.

Since California counties vary widely, finding one policy that fits San Francisco and Alpine might not be the best solution, said Dorothy Johnson, a lobbyist for the California State Association of Counties.

On that point Airbnb officials agree. Chris Lehane, Airbnb’ global policy chief, said their goal isn’t uniform agreements, but agreements that meet the needs of individual communities.

“We really made a commitment to work with cities,” Lehane said. “We needed to take responsibility as a platform … to develop solutions.”

The Nevada County agreement – which does not include incorporated towns – could double the county’s transient occupancy tax receipts, said Tina Vernon, the county treasurer and tax collector.

Of the county’s 98,000 households, 67,000 live outside of the incorporated cities of Nevada City, Grass Valley and Truckee. Vernon said she can’t say how much tax the agreement will generate because Airbnb wouldn’t tell her how many existing hosts live in unincorporated Nevada County.

The unincorporated county currently has around 200 registrants paying short-term rental taxes generating around $300,000, she said. Most of those registrants are more traditional vacation rentals, Vernon said. Outside experts have told her there are likely another 100 to 150 people now renting rooms and not paying taxes.

“It would bring in another $300,000,” Vernon said of the agreement with Airbnb. “That is substantial for the unincorporated area.”

That number might be even higher. There are 745 Airbnb hosts within Nevada County, including the incorporated areas, generating a median host earnings of $7,949, according to Airbnb, which would not break out how many of these hosts are located in the unincorporated county. Assuming all of those hosts paid the 10 percent tax, that’s roughly $600,000 split between the cities and Nevada County.

Unlike bed-and-breakfast operators with a direct relationship with the county, Airbnb will write big quarterly checks for all its operators. They will not have the names, addresses or any other individualized information on Airbnb rental hosts.

“We decided it was a win-win for us,” Vernon said. She’d previously get a report that a home was being used as a rental, but was unable to verify an address through the Airbnb website.

“We will see the revenue go up because as a small office we don’t have the staff to find them,” Vernon said.

It’s unclear how much of Airbnb’s growth is fueled by existing rentals moving their listings to the site and how many are new homeowners just now listing their properties or bedrooms. It is clear that Airbnb represents a growing share of Lake Tahoe’s short-term housing. Airbnb said its hosts in the Lake Tahoe region collected $32 million from Nov. 15, 2016, to April 15, 2017 – up 50 percent over the prior year.

Back down in the valley, the city of Sacramento has been negotiating with Airbnb on a sales tax agreement, said Brad Wasson, the city’ revenue manager.

How much information to share has been the sticking point. Wasson said he was surprised how little information Airbnb shares. The company has maintained its motivation is to protect its hosts while reaching a solution that achieve the city’s policy goal. Wasson said the city and the company were close to an agreement.

The San Francisco agreement would require hosts there to agree to disclose their name, address and ZIP code information to the city.

Editor’s note: This story was changed May 3 to correctly state that since California counties vary widely, finding one policy that fits San Francisco and Alpine might not be the best solution.

Read Next

16 Powerhouse, a high-profile, high-rent apartment at the corner of 16th and Q streets that opened four years ago is not going to get a major addition that will include the type of amenities apartments now need in this new era of “urban resort” style living complexes.